Week 13 - Fraudulent Trading S213 of Insolvency Act 1986

Question 1

When does fraudulent trading apply?

Answer 1

Where the business of a company has been carried on with the intention of defrauding the creditors of the company or for some other fraudulent purpose

Question 2

Is fraudulent trading a criminal offence?

Answer 2

Yes

Question 3

Is wrongful trading a criminal offence?

Answer 3

No

Question 4

What is the main difference between fraudulent trading and wrongful trading?

Answer 4

Intent. Directors who take part in fraudulent trading have a clear intent to deceive and defraud their creditors and customers

Question 5

Who must prove intent and how?

Answer 5

The Insolvency Service must prove intent, so a thorough investigation will take place

Question 6

What can both fraudulent and wrongful trading lead to?

Answer 6

Civil liability on the part of the directors and a liquidator can seek a contribution from directors who have committed either wrongful or fraudulent trading

Question 7

What does a civil prosecution involve?

Answer 7

Civil is around getting them to reimburse to the company so that the liquidator has that pot of money swelled and can divide it as they need to

Question 8

How long can you be imprisoned for in fraudulent trading?

Answer 8

Maximum term of imprisonment of 10 years

Question 9

Which has a higher burden of proof - fraudulent or wrongful trading?

Answer 9

Fraudulent trading has a much higher burden of proof

Question 10

If a director is found to be guilty, what consequence is possible?

Answer 10

May not be allowed to be a director of any company for up to 15 years

Question 11

Directors who take part in fraudulent trading have a clear intent to…

Answer 11

Deceive and defraud their creditors and customers